With the Tax Cuts and Jobs Act recently signed into law, you’re now doubt wondering how this 2017 tax bill will affect your future taxes and wages. Infinity Financial Services in Oakland takes a closer look at how the bill will impact individuals/households and businesses in the Bay Area.
The top corporate tax rate – that is, the one which applies to publicly-traded companies – drops from 35% to 21% in 2018. Also, the new tax bill means significant changes for “pass-through” businesses, which are businesses that don’t file taxes as an entity (i.e. a brick and mortar business), but see their taxes passed through to the owner’s individual tax return. Most of these businesses are small businesses: sole proprietorships, limited liability companies, and the like. Under the new law, business owners can deduct 20% of their pass-through income before the income is taxed at the applicable rate.
Regarding social security, employees who paid 6.2% in social security taxes on each paycheck last year will pay 4.2% in 2018, applicable to yearly incomes up to $106,800. Also, the 2018 tax bill ushers out several deductions that some businesses and workers were accustomed to claiming, such as:
- Unreimbursed employee expenses
- Tax preparation expenses
- Moving expense
- Casualty and theft losses
- Employer-subsidized parking and transportation reimbursement